Hydrogen, metals lead Australia's resource plans - but there's a catch

(Reuters) - If "follow the money" is good advice for predicting the future supply of commodities, then Australia shows that renewable energies are pulling ahead of fossil fuels, but not massively so.

The total value of resource and energy projects in Australia is as much as A$702 B ($471 B), according to data released on Monday by the Office of the Chief Economist at the federal Department of Industry, Science and Resources.

Of this amount, hydrogen projects accounted for A$266 B of potential investment, the largest single contributor to the total.

A further A$42 B of investment is possible from counting what can broadly be defined as new energy metals and minerals, the annual report on the state of major resource projects said.

The total of proposed hydrogen and new energy projects is pegged at about A$308 B in 2022, up about A$100 billion from the end of 2021.

Australia's traditional powerhouse commodity exports of iron ore, liquefied natural gas (LNG) and coal are still attracting significant investment interest.

Oil and gas projects worth A$127.2 B are in the pipeline, with the vast majority of those LNG ventures in Western Australia, which is already the state supplying the bulk of the super-chilled fuel.

Projects for both thermal and coking coal total A$79.6 B, while iron ore ventures have a pipeline of up to A$76 B.

Australia is the world's largest exporter of iron ore and coking coal, both of which are used to make steel, while it ranks second in thermal coal behind Indonesia.

Among the other commodities, copper has investment plans of up to A$9.7 B, while gold, of which Australia is the world's biggest net exporter, has a pipeline of up to A$13.5 B.

But the overall message from the government report is that new energies are where the bulk of interest lies, but with one massive caveat.

HYDROGEN IDEAS, GAS REALITIES

The government also splits up the investment plans into four categories, namely publicly announced, at the feasibility stage, committed and completed during the year in review.

The vast majority of the hydrogen projects are at the publicly announced and feasibility stages, which are the earliest parts of the process and means they are several years from a final investment decision, assuming the venture progresses that far.

Of the potential hydrogen projects only one venture, with a value of A$100 MM is at the committed stage, and only one project worth A$500 MM was completed in the year to Oct. 31.

In contrast, oil and gas projects at the committed stage total A$46 billion, while five ventures worth A$2.4 B were completed in the period under review.

The government data for oil and gas would have been completed prior to the current dispute between the industry and the federal government, which last week passed legislation to cap the price of natural gas and thermal coal supplied to the domestic market.

The industry responded with fury at the legislation, even though the price cap of A$12 a gigajoule is higher than the price that prevailed in the domestic market prior to Russia's invasion of Ukraine in February, which sent international LNG prices sky-rocketing.

Whether the industry makes good on its threats to suspend investment in gas projects in Australia's populous eastern states remains to be seen, but it's worth noting that there isn't much new investment planned for this region anyway, with the majority of spending being directed at LNG projects in Western Australia.

Coal projects worth A$7.6 B were at the committed stage and three ventures worth A$2.5 B were finished in the year to Oct. 31.

What the data show is that oil and gas and coal are where the money is currently being spent, but that its likely over time the new investment will swing more toward renewable and clean energies, such as hydrogen and metals such as lithium and nickel.

Whether the pipeline of hydrogen projects actually progress to reality is also dependent on a range of factors, including policy setting from the various state and federal governments, purchase agreements with potential buyers, both domestic and offshore and a willingness of investors to put real money into what is still a new industry.

($1 = 1.4914 Australian dollars) (Editing by Christian Schmollinger)

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